In an article titled Intel’s CEO Pick Is Predictable, but Not Its No. 2, published in the online edition of the Wall Street Journal on Friday, May 3, 2013, the authors, Don Clark and Joann S. Lublin, note the surprise of some Intel analysts at the selection of Renée James as the new President of Intel. We share their surprise.
Ms. James’ major achievements include her instrumental roles in the acquisitions of Wind River Systems and McAfee. Neither of these businesses have anything to do with chips, or firmware. So why Ms. James for the position of President?
We can’t help but interpret this executive appointment as a signal of a change in likely market direction for Intel, going forward. We think the board is tacitly throwing in the towel, at least for now, on seizing any type of position as a contender to ARM in the small, smart mobile device markets. Sure, Intel made many attempts over the years to take ground in these markets and failed. But now failure appears to be maturing into an outright retreat.
If we’re right, it will likely be much harder for companies depending on Intel’s chips (Microsoft and its OEMs) to win any market share of any significance from the ARM crowd. Intel’s innovations (like the current Atom processor) will continue to fail to meet some fundamental market requirements and leadership will remain largely in the hands of Android and Apple.
It’s nevertheless fascinating to watch an enormous business like Intel implement a horizontal product strategy. Diversification certainly makes sense from a risk management perspective. With its cash on hand, Intel can afford to buy its way into markets. The sales cycle patterns of McAfee and Wind River Systems are likely very different from those of Intel’s core chip business. Perhaps the board selected Ms. James for her ability to help the business continue its diversification strategy.
A healthy Intel, feeding off of subsidiaries like McAfee and Wind River Systems, can certainly take the time to think harder about how to re-enter mobile markets with better technology.
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